NEW DELHI: The Cabinet on Wednesday raised the import duty on sugar to 40% from 25% to check crashing prices of the sweetener. It also withdrew the duty free import authorization scheme for exporters and the excise duty on ethanol supplied for blending will also be withdrawn from next sugar season. 

The government thereby met some of the key demands of sugar millers. In an official statement, the government said, "It has been decided that ethanol produced from molasses generated during the next sugar season and supplied for ethanol blending would be exempted from excise duty and the price benefit would be passed on to the sugar mills/ distilleries." 

Such measures are expected to improve the adverse price sentiments in respect of sugar and would improve the liquidity in the industry, facilitating the clearing up of arrears of cane dues to farmers, the food ministry claimed. 

Sources said the issue of creating a buffer stock of 10% of the estimated sugar production may come up for deliberation in the near future. Indian Sugar Mills Association (ISMA) has urged the government "to quickly decide on our request to buy out 10% of our current year's sugar production" as they welcomed the government measures. 

It claimed only creating a buffer stock by government, which would cost about Rs 7,000-Rs 8,000 crore to the exchequer, will help the industry come out of the crisis in the short run and ensure that a major portion of cane price arrears of farmers is cleared before the start of the next sugar season. Cane arrears have reached Rs 20,000 crore.